safta2

SAFTAIndia-Pakistan-Afghanistan Trade: SAFTA India-Pakistan-Afghanistan Trade Harsh Vivek February 1, 2006 – Taj Mahal Palace and Towers, Mumbai India Development Foundation
The Presentation Agenda: The Presentation Agenda SAFTA Trade: India-Pak-Afghan Customs duties The way forward
Why regional trade?: Why regional trade? More integrated markets Benefits of trade multipliers in the region Intra-bloc trade – ‘cluster approach to development’ Exploit trade complementarities of neighbouring countries Cooperate to compete (India-China energy example) Price competitiveness of intra-bloc trade More benefits (relatively) to small countries in intra-bloc trade E.g. Sri Lanka gaining relatively more from India-Sri Lanka trade
SAFTA: SAFTA SAFTA Agreement – 'Strengthen intra-SAARC economic cooperation to maximize the realization of the region’s potential for trade.' Governed by WTO principles Reciprocity, special and differential treatment Awareness of the needs of least developed members (Revenue Compensation Mechanism) Focus on elimination of tariff and non-tariff barriers Two institutions to oversee implementation SAFTA Ministerial Council (highest decision-making body) Committee of Experts (senior economic official from each member-state) Role of the SAARC Secretariat (?)
Tariffs and Non-tariff barriers: Tariffs and Non-tariff barriers Tariffs (10 year phase-out of tariffs) Least developed members reduce tariffs to a maximum of 30 per cent (in first 2 years). Tariffs already below 30 per cent will be reduced by 5 per cent annually for least developed members Non-least developed members reduce tariffs to a maximum of 20 per cent (first 2 years) Tariffs already below 20 per cent will be reduced by 10 per cent annually for non-least developed members Non-tariff barriers – QRs eliminated for products not on sensitive-list
The Presentation Agenda: The Presentation Agenda SAFTA Trade: India-Pak-Afghan Customs duties The way forward
Contribution to SAARC trade (2001): Contribution to SAARC trade (2001)
Trade within SAARC as a per cent of trade with Asia and the World: Trade within SAARC as a per cent of trade with Asia and the World
India’s trade with SAARC: India’s trade with SAARC
Share of developing and Asian countries in India’s trade: Share of developing and Asian countries in India’s trade
Country profile of tariff structure: Country profile of tariff structure
Trade with Pakistan: Trade with Pakistan Bilateral trade a precursor to peace and security in the region Economic-ties: a good confidence-building measure Dramatic increase in trade between India and Pakistan – 76 per cent growth in 2004-2005 More than USD 600 million (2004-05), likely to cross USD 1 billion by 2005-2006 Exist complementarities in many sectors in the two countries (agri-business, textiles, auto-components, engineering and tourism)
List of export-import commodities: List of export-import commodities Pakistan import list / India export list Electric and power machinery Iron-ore, pig iron Medicine and pharma products Organic chemicals, pesticides and insecticides Rubber tyres Pulp and paper Pakistan export list/ India import list Animal hides and skins Raw cotton Edible nuts Metal scrap Precious and semi-precious stones Jewelry Source: International Trade Statistics Yearbook (2001), United Nations
Composition of India-Pak trade: Composition of India-Pak trade Major trade in mfg. goods (60 per cent) Bulk trade in agriculture and allied products Sugar and onions (recent examples) Good potential for increase in trade Textiles Petroleum
Trade in agriculture commodities: Trade in agriculture commodities
Trade in engineering goods: Trade in engineering goods
Afghanistan’s trade: Afghanistan’s trade Trade suffered a setback due to prolonged strife, civil wars and political turmoil Total exports to India and Pakistan (2004) – USD 150 million (approx) Bulk of Afghanistan’s exports go to Pakistan (69 per cent in 2004) India (8%) and Russia (6%) other major trading partners Imports from a larger number of countries
Afghanistan trade destinations: Afghanistan trade destinations
Composition of Afghan. trade (2004): Composition of Afghan. trade (2004)
The Presentation Agenda: The Presentation Agenda SAFTA Trade: India-Pak-Afghan Customs duties The way forward
Customs Valuation: Customs Valuation Indian Customs requires extensive documentation. Processing delays often due to complex tariff structure and multiple exemptions, which may vary according to product or user.
Customs Valuation: Customs Valuation On an average, documents required for importing or exporting one consignment in/out of India includes: Source: An UN ESCAP estimate.
SAFTA - % of Tariff Cut : SAFTA - % of Tariff Cut The tariff concessions varied in depth from 5-100 % The tariff cuts offered by India have been the deepest, varying from 25-100 % for LDCs and 10-90 % for all countries The other countries offered much milder tariff cuts ranging from 7.5-10 to15-20 % for all countries (except Sri Lanka, which offered cuts up to 75 %)
SAFTA - Tariff Structure : SAFTA - Tariff Structure Provides free trade in goods The Agreement does not look at trade in services The issue of cross-border investments is also not dealt with strongly in the Agreement Each SAFTA nation will maintain a Sensitive List to protect the interests of the domestic stakeholders The Agreement also provides for an institutional mechanism of the SAFTA Ministerial Council (SMC) Detailed Dispute Settlement Mechanism (on the lines of the WTO) Proper documentation, case based on scientific, verifiable evidences
India’s Trade with SAFTA Nations : India’s Trade with SAFTA Nations
India's Market among SAFTA Nations: India's Market among SAFTA Nations India’s Market in SAARC for it’s Major Export Commodities
The Presentation Agenda: The Presentation Agenda SAFTA Trade: India-Pak-Afghan Customs and transit rights The way forward
The Way Forward: The Way Forward Need to strengthen the Agreement Expanding the scope to include trade in services Focus on cross-border investments Simplification of trade procedures and documentation Strengthening the implementation of the Agreement – focus on trade reforms in SAARC Involvement of international organisations Harmonizing tariffs and standards between nations Working-out a compensation mechanism for the revenue loss by the least developed countries in the region
In conclusion…: In conclusion… 'The success of SAFTA greatly depends on the political commitment and harmony among all the signatory members, and on the vigour and vision with which India and Pakistan – the two largest economies in the region – lead meaningful trade reforms.'
Thank you.www.idfresearch.org [email protected] : Thank you. www.idfresearch.org [email protected]